Criminal Procedure Code – Section 120(3) – Power of Magistrate to Discharge a Suspect – Threshold of Sufficiency and Reasonableness – Judicial Discretion
786
BLOGGER
SPEAKS
Criminal Procedure Code – Section 120(3) – Power of Magistrate to Discharge a Suspect – Threshold of Sufficiency and Reasonableness – Judicial Discretion – Difference between Civil and Criminal Liability – Corporate Personality and Vicarious Liability – Misapplication of Law
Background
The suspect–petitioner, a Director of Horamulla Tea Plantation (Pvt) Ltd., sought revision under Article 138 of the Constitution and Sections 364 and 368 of the Criminal Procedure Code (CPC) to set aside an order of the Magistrate’s Court of Balangoda dated 22.12.2021, which had refused to discharge him under Section 120(3) of the CPC.
The complaint arose when a tea supplier alleged non-payment of Rs. 3,771,890 for tea leaves supplied to the said company. The police, after investigation, reported offences under Sections 403, 386, and 389 of the Penal Code (cheating, misappropriation, and criminal breach of trust). The petitioner contended that the transactions were commercial in nature between the supplier and the incorporated company, and that he could not be personally prosecuted.
The Magistrate rejected the preliminary objection, holding that once a charge sheet was framed, the petitioner could not seek discharge under Section 120(3).
Issues
Whether the Magistrate misapplied Section 120(3) by refusing to discharge the suspect solely because charges were framed.
Whether the Magistrate failed to distinguish between civil liability and criminal liability.
Whether corporate liability of a company could extend to its directors in their personal capacity.
Whether the Magistrate erred in not independently assessing sufficiency of evidence before proceeding.
Held
Section 120(3) confers a judicial discretion on the Magistrate to discharge a suspect after the completion of investigation if the material does not disclose a prima facie case.
The
Magistrate must make an independent assessment of the evidence, and cannot
mechanically adopt the police report.
The framing of a charge does not automatically exclude the operation of Section 120(3).
A
Magistrate is not a mere “rubber stamp” for the prosecution; he must
judiciously decide whether there exists sufficient material to proceed.
The distinction between civil and criminal liability was ignored.
The
complaint concerned non-payment in a commercial transaction between the
complainant and a limited liability company. The liability, if any, was
corporate, not personal to the directors.
The Magistrate erred in attributing “vicarious liability” to the directors when the company itself was not made a suspect.
This
was inconsistent with the principle in Salomon v. Salomon & Co. Ltd. [1897]
AC 22 (HL), which recognizes the separate legal personality of a company.
The Court emphasized that Section 120(3) should be exercised to protect an individual’s right to liberty and to prevent unwarranted prosecutions where no prima facie case exists.
The threshold under Section 120(3) is sufficiency and reasonableness, not proof beyond reasonable doubt.
Ratio Decidendi
The power to discharge under Section 120(3) of the Criminal Procedure Code requires the Magistrate to make a judicially independent assessment of whether the investigation reveals a prima facie case. The mere filing or amendment of a charge sheet does not bar the exercise of this discretion.
Corporate
officers cannot be held personally liable for company debts or defaults unless
the corporate veil is pierced by clear evidence of fraud or dishonest intent.
Precedents and Authorities Cited
Abdul Sameem v. Bribery Commissioner (1991) 1 SLR — On safeguarding rights of suspects and the duty of the Magistrate to act judicially.
Salomon v. Salomon & Co. Ltd. [1897] AC 22 (HL) — On corporate personality and separation of liability.
CA/PHC/108/2010, CA minute dated 26.08.2014 — On the non-delegable duty of a Magistrate to frame charges.
Sections 114, 116, 120(3), and 186 of the CPC — Sequential thresholds for sufficiency of evidence and discharge.
Decision
The Court of Appeal (Iddawala J., with Wijesundera J. agreeing) held that the Magistrate’s order was misconceived in law, having failed to apply the correct test of sufficiency and to distinguish corporate from personal liability.
The impugned order of 22.12.2021 was set aside, and the suspect-petitioner and his co-suspect (wife) were discharged.
Principle Summarized
A Magistrate’s discretion under Section 120(3) CPC is not extinguished by the mere framing of charges. The power to discharge must be exercised judicially, protecting liberty and preventing misuse of criminal process in purely civil or corporate disputes
-------END OF THE COMMENTS MADE BY BLOGGER---
JUDGMENT
Lasantha Pradeep Kumara Wijesinghe Vs 1. Officer-in-charge,
Special
Criminal Investigation Unit Police Station, Ratnapura.
Court
of Appeal Application No: MCR/001/2022
BEFORE: Menaka Wijesundera J Neil Iddawala J- 14.12.2022
Iddawala
– J
This
is a revision application filed by the
suspect-petitioner (hereinafter the petitioner) to set aside the order of the
Magistrate Court of Balangoda dated 22.12.2021 which refused to discharge the
suspect under Section 120(3) of the Criminal Procedure Code (hereinafter the
CPC) based on a preliminary objection raised by the petitioner The parties
agreed to proceed with one judgment for both MCR 01/22 and MCR 02/22, therefore
the present judgment is applicable to both the cases.
The facts of the case are briefly as follows. The petitioner along with the suspect respondent, his wife are Directors of the Horamulla Tea Plantation (Pvt) Ltd. The virtual complainant is a tea supplier. He lodged a complaint on 17.03.2020 before the Special Crime Investigation Unit of Rathnapura Police on the failure of the said company to pay him the money in arrears for the tea leaves he has supplied them. The virtual complainant has supplied tea to the said company since 2018, January. However, this case is concerned with regard to the most recent transaction in a consistent chain of transactions, where the company has failed to pay a due amount of Rs. 3,771,890/= for the supplied tea leaves. Consequentially, the police reports suggested that there exists a criminal liability punishable under Sections 403, 386 and 389 of the Penal Code against the petitioner and the suspect respondent.
The
petitioner invoked the revisionary jurisdiction under Article 138 of the
Constitution read together with Sections 364 and 368 of the CPC to set aside
the said order and grant lawful relief based on the grounds that the learned
Magistrate has misconceived the law under Section 120(3) and Section 186 of the
CPC by refusing to discharge the petitioner. Therefore, Counsel for the
petitioner avers the following exceptional circumstances to invoke the
extraordinary jurisdiction of this Court by way of revision to set aside the
Magistrate’s Court order.
1. The order of the learned Magistrate is a
miscarriage of justice detrimental to the freedom and liberties of the
petitioner as the learned Magistrate has not judiciously exercised the judicial
discretion bestowed under Section 120 (3).
2. The Court is misdirected in understanding
the difference between civil liability and criminal liability.
3. The investigation is tainted with
illegality as the police has failed to report the petitioner’s statement to the
Magistrate and the learned Magistrate has overlooked this fact.
Hence,
the instant application pivots on the interpretation of Section 120(3) of the
CPC and assessing whether the learned Magistrate’s refusal to discharge the
suspects is misconceived in law.
Impugned
order
The impugned order contends that by reason of a charge sheet been framed (which was later amended), the petitioner is prevented from invoking Section 120(3) of the CPC:
SINHALA TEXT FROM THE JUDGMENT IS NOT SHOWN HERE
(Page 8 of the order at page 119 of the Appeal Brief)
Similarly,
the learned Magistrate contends as follows:
(Page 4 of the Order at page 115 of the Appeal Brief) (Emphasis added)
Hence
the main reason for the learned Magistrate to refuse the discharge of the
petitioner is the fact that the complainant has framed charges in light of the
investigation conducted into the complaint. Therefore, it is the contention of
the learned Magistrate that Section 120(3) of the CPC cannot be triggered in
the instant case. At this juncture, it is pertinent to examine Section 120(3)
of the CPC.
Section
120(3) of the CPC
Section 120(3) of the CPC empowers the Magistrate to discharge a suspect based on the completed investigation into a complaint. The Section reads as follows:
“As soon as the investigation is completed the officer in charge of the police station shall forward to such court a report in the prescribed form. If in the report there is no allegation that the suspect has committed or been concerned in the committing of any offence the Magistrate shall discharge him. If the report alleges that the suspect has committed or been concerned in committing an offence he shall be prosecuted in accordance with the provisions of this Code.”
It
must be noted that the application of Section 120(3) is informed by its
preceding Sections which reflects the continuous sequence of formulations
within the CPC. Hence Section 120(3) must be read within its context where it
is placed under Chapter XI of the CPC titled “Information to Police Officers
and Inquiries and Their Powers to Investigate” contained in Part V of the CPC
titled “Investigation of Offences”. It is significant to note that, with the
exception of Section 115 which deals with a specific circumstance, Section
120(3) is the first time the CPC recognizes the power of a Magistrate to
intervene during or at the conclusion of an investigation under Chapter
IX.
This further reinforces the contemplation by drafters that Section 120(3) ought
not to be read in a vacuum.
As
such, it must be noted that prior to a Magistrate discharging a suspect under
Section 120(3) of the CPC, Section 114 of the CPC provides for the release of a
person under investigation from custody (upon a bond) on the basis of deficient
evidence. As such, the threshold for such release is stipulated as “it
appears……………that there is not sufficient evidence or reasonable ground of
suspicion to justify the forwarding of the accused to a Magistrate’s Court…”.
While such release is not akin to a discharge by the Magistrate as envisioned
in Section 120(3) (under Section 114, the person is released upon executing a
bond or released under the direction to appear when so required before a
Magistrate), the threshold requirement of “sufficient evidence or reasonable
ground of suspicion” points to the context in which Section 120 of the CPC must
be evaluated. This contention is further reinforced by Section 116 of the CPC
which stipulates another threshold requirement
for an officer or inquirer to forward a case to a Magistrate’s Court if
sufficient information is well founded or if further investigation is
necessary. Therefore, even before a completed investigation arrives at Section
120, the CPC delineate a criterion of sufficiency. Bearing this context in
mind, we now turn to examine Section 120(3) of the CPC.
The wording of Section 120(3) clearly points to the role of the presiding judge in assessing a threshold question on whether the material placed before him warrants the discharge of the suspect against whom an investigation has been completed pursuant to a complaint. This would serve the dual purpose of ensuring the rights of the suspect (yet to be named as an accused) as well as filtering out those cases which have a lower likelihood of conviction at the very preliminary stage of a would-be prosecution. Within the ambit of such a ‘filtering purpose’, is the notion that while a Magistrate is not expected to conduct a trial before a trial, he must nevertheless assess the existence of sufficient evidence in determining whether a suspect ought to be discharged or not. In doing so, the presiding judge must apply their mind to the material revealed during the investigation and make a reasonable, independent assessment on whether or not the threshold requirement is met within the context of Section 120(3), bearing in mind the implications of Sections 114 and 116 of the CPC. This is ever so important as Section 120(3) of the CPC is the first time a Magistrate is called upon to evaluate the assessment of the investigating officer that the complaint against the suspect warrants the case to proceed before the Magistrate’s Court.
This
assessment does not include, as rightly pointed out in the above quote, an
evaluation of the elements of the crime, the actus reus and the mens rea of the
suspect. That is a task reserved for the trial judge. What it does include is
an exercise of discretion in deciding whether a prima facie case has been
presented, which involves an independent assessment of the material divulged
during the investigation. This requirement cannot be relegated to a mechanical
act of rubber stamping the investigator’s conclusion. It involves the use of
discretion by a Magistrate, independent of what the investigator contends. If
not, a Magistrate will be diminishing their own discretion to a mere mechanical
assent of what the investigators have concluded.
Application
of Section 120(3) of the CPC
As quoted above, the learned Magistrate in his impugned Order places a heavy reliance on the conclusion made by the complainant-respondent (hereinafter the complainant). He concludes that based on the material disclosed during the investigation, charges can be maintained against the petitioners and that charges have been framed accordingly.
However, what is absent in the analysis is any independent reference to the materials thus disclosed during the investigation. Reiterating the submissions made by both parties is the first step in the exercise of the judicial discretion, but a judge should not stop there. There must be some evidence that the judicial mind was applied to the facts and law, independent of the submissions made by the parties.
Nevertheless,
it must be borne in mind that when applying the judicial mind to the facts and
circumstances, the degree of evaluation
during the Section 120(3) stage of a case is not the same as the degree
of evaluation at a later stage- such as the trial. At the stage where Section
120(3) of the CPC, the discretion is utilized to assess a threshold of
“sufficiency” and not the threshold of beyond reasonable doubt. The minimum
standard of discretion to be used at Section 120(3) stage must be accompanied
by evidence of an independent assessment which goes beyond the restatement of
what the parties’ submissions. Framing of a charge does not, ipso facto,
prevent the triggering of Section
120(3). The contrary would mean that the discretion of a Magistrate to discharge the suspects under Section 120(3) of the CPC is disallowed the moment a charge sheet has been framed. Ordinarily, a Magistrate does not frame the charges. Instead, the draft charges tendered by the prosecution will be accepted by the Magistrate and the same will be perceived as the charges framed by the Magistrate himself. This view has been endorsed in CA PHC 108/2010 CA minute dated 26.08.2014. However, the acceptance by the Magistrate in the said instance is not a mechanical act of rubber stamping the prosecution’s draft, it involves a judicious exercise of discretion. After such an exercise and the charge sheet framed, by reason of it being considered as framed by the Magistrate, then an option of discharge under Section 120(3) of the CPC will no longer be available. Therefore the reference in Section 120(3) to “If in the report there is no allegation that the suspect has committed or been concerned in the committing of any offence” and “If the report alleges that the suspect has committed or been concerned in committing an offence he shall be prosecuted in accordance with the provisions of this Code” is a reference to the threshold of whether the Magistrate is satisfied with the commission of an offence with a prima facie prospect of securing a conviction. To that end, the Magistrate must make an independent assessment whether the draft charges presented by the prosecution has any merit in it. He ought not to act as a mere rubber stamp.
The
unacceptability of a contrary interpretation of Section 120(3) of the CPC is
further reinforced by the later formulation of Section 186 in the CPC which
empowers the Magistrate to discharge a suspect at any time. This section in
furtherance to an individual’s right to personal liberty and freedom. Every
individual is entitled to be free from arbitrary detention or prosecution in
any instance where the commission of a crime cannot be sufficiently ascertained
through investigations. Thus, it is within the power of a Magistrate to
discharge such suspects, in order to uphold their rights.
In
this regard, this Court would like to echo the words of his Lordship Justice
Gunawardana in Abdul Sameem v The Bribery Commissioner (1991) 1 S.L.R.
“Furthermore, whilst appreciating the pressures on time and the large volume of
work the Magistrate’s Courts are called upon to handle, it is nevertheless
important, that rights of an accused person are safeguarded and that he be
brought to trial according to accepted fundamental principles of criminal
procedure”
As
discussed at the outset, under Chapter XI of the CPC, there are several
threshold requirements for a complaint to proceed within the stipulated
sequence of investigation. For instance, the investigating officer must be
satisfied of “sufficient evidence or reasonable grounds of suspicion” to
justify the forwarding of a suspect to the Magistrate’s Court (Section 114 and
116 of the CPC). When such a suspect is brought before a Magistrate to consider
whether he or she ought to be discharged under section 120(3) of the CPC, it is
implied that the Magistrate should use his discretion in a judicious manner to
assess whether the threshold requirement has been met and whether there is
prima facie case against the suspect.
In light of this, it is the considered view of this Court that the impugned order of the learned Magistrate has failed to satisfy this burden envisioned under Section 120(3) of the CPC.
SINHALA TEXT IN THE JUDGMENT NOT COPIED
(supra), without an independent review of the material divulged by the completed investigation, amounts to relegation of the discretion envisioned by the framers of the CPC. On the other hand, the framing of the charge/s and amending it as necessary is a duty of a Magistrate. As His Lordship
Justice
Salam (P/CA) echoed in CA/PHC/108/2010 (Supra) at page 6 of the judgment- ‘It
is a magisterial duty which cannot be delegated to the police. Whether there is
sufficient ground to proceed against the suspect in the hands of a judicial
officer who is expected to address his mind judiciously. If the duty of framing
the charge is to be entrusted to others the purposive approach to Section 182 will
be rendered nugatory’.
Hence,
this Court opines that the impugned order is misconceived in law as the learned
Magistrate has failed to take into consideration the lack of material in the
submitted reports supporting the commission of the alleged crime by the
suspect. This will be discussed in detail in the next segment.
Threshold requirement unmet
It
must be noted that Magistrates are not routinely required to evaluate material
divulged at the completion of an investigation against the threshold of
sufficiency and reasonableness. The special circumstance of the instant case is
that the petitioner has raised a preliminary objection based on Section 120(3)
of the CPC. In such an instance, it is the duty of the Magistrate to employ his
discretion and make an inquiry into the threshold criterion. It is within the
interest of justice to conduct such an inquiry before the charges are formally
read against the suspect. Therefore, it can be noted that the petitioner has
raised the preliminary objections well within the correct time period, before
charges are formally read against him. In this instant case charges have not
been formally read over against the petitioner and the summons have not yet
been served on the suspect-respondent. Hence, the Magistrate shall at this
juncture entertain such preliminary objections and inquire into the threshold
criterion.
Upon a perusal of the facts and circumstances of the instant case, it is evident that the virtual complainant refers to a commercial transaction between himself and the incorporated entity named Horamulla Tea Plantation (Pvt) Ltd. The petitioner is one of the Directors of the tea company. The complainant has not conducted any individual transactions of a personal nature with the said director. (R1 the complaint to the Police dated 17.03.2020 by the virtual complainant-respondent) The agreement of sale of goods transpired between the Horamulla Tea Factory and the complainant, and, as such the transactions therein transpired between the company and the complainant in the ordinary course of business, which makes it irregular in law to hold an individual, of the company liable, in his personal capacity, for the arrears of payment.
In
the celebrated case of Saloman v A. Saloman & Co Ltd [1897] AC 22, HL, the
Saloman Principle was introduced which distinguished between the rights and
duties of the company from that of its stakeholders and directors. Therefore,
the company attains the status of a legal person while its directors or
stakeholders gain the status of natural persons, where the liability of one
does not cross through to the other, which is also termed as the corporate
veil.
Thus,
in this instant matter, as the course of this agreement of sale of tea leaves
was conducted by the company and not individually by the petitioner (as
admitted by the complainant himself in the complaint to the Police dated
17.03.2020- “R1” -Document marked as “R1” by the complainant respondents with
his objections), it is the company that is liable for the breach (if any) of
the business transaction. Therefore, corporate liability of the Horamulla Tea
Factory does not transfer to the petitioner, unless there is evidence to prove
the petitioner’s direct engagement in fraud, misappropriation or the intention
to engage in such fraudulent conduct. In which case the corporate veil will be
shifted to hold an individual liable for such offences. Therefore, unless the
completed investigation divulged a piercing in the veil of incorporation
afforded to the Horamulla Tea Plantation (Pvt) Ltd, by virtue of its
incorporation, individual criminal liability cannot be presumed to be
attributed to the petitioner. It is pertinent to note that the caption of the
case application does not include Horamulla Tea Plantation (Pvt) Ltd, as a
suspect.
At page 5 of the impugned order (page 117of the Appeal Brief), the Magistrate refers to “vicarious liability” in the following manner:
sinhala version cited in the judgment not copied here
This is erroneous for two reasons. Firstly, as explained above, the commercial transaction that is central to the investigation was not of a personal character between the virtual complainant and the petitioner. Therefore, the entire complaint is premised upon a transaction between a person and a business entity. This nuance cannot be brushed aside.
Secondly,
the reference to Section 261 of the CPC is a pertinent consideration in this
regard, however the Magistrate cannot rely on it since the complainant has not
named the corporation as the suspect. The suspects in the instant case are the
petitioner and suspect respondent (his wife) in their personal capacity as
individual persons as opposed to their professional capacity as representatives
of Horamulla Tea Plantation (Pvt) Ltd. If the complainant purports that the
petitioner is criminally liable for the alleged default of payment, thus
characterizing the transaction as a personal exchange, it cannot be said in the
same breath that the petitioner’s wife is also a suspect. It is paradoxical to
attach any individual liability to the wife because the husband has been
alleged to have committed a crime under the Penal Code. This absurd outcome is
a manifestation of the requirement to clearly delineate the separate legal
personality of the Horamulla Tea Plantation (Pvt) Ltd from its employers and
the dismissal of the Magistrate of any notion of “vicarious liability” is in
complete disregard of this essential element in the investigation.
None
of these matters have been considered by the learned Magistrate in the impugned
order. The attribution of the purported criminality has a direct impact on the
threshold of sufficiency and reasonableness as contemplated by Section 120(3)
read within its context, and it is the considered view of this Court that in
the absence such consideration, the matter warrants this Court to invoke its
revisionary jurisdiction in setting aside the impugned order. This Court is of
the observation that the learned Magistrate has erred in distinguishing the
liability of the company and that of the natural persons involved in the course
of business, thus misdirecting the proceedings towards criminal liability of
the petitioner whereas, it is a matter of corporate liability.
Thus, it is evident that there is no clear allegation against the petitioner in his individual capacity. The Magistrate has erroneously held the petitioner criminally liable to the extent of framing charges against him, even in the absence of any personal transactions between the petitioner and the virtual complainant, thus failing to allude corporate liability in its stead. While it may be argued that criminal liability may be attached to the petitioner’s official capacity, it is clear that the completed investigation failed to divulge any such link.
Conclusion
In line with the above observations, the Magistrate has a duty to ensure correct application of the law set out in Section 120(3) of the CPC with an eye to the individual’s freedom and liberty. Magistrate must thoroughly peruse the reports of the investigation to firmly ascertain the grounds for suspicion of the suspect, thereby properly discharging and preventing the accumulation of cases which do not seemingly establish suspicion. Although, it is recognized that, given the workload of a Magistrate Court, it is impractical to expect to have all the cases thoroughly perused, however, when such objections are brought to the attention of the Magistrate at the very outset of a proceeding, as was seen in the present case, due regard must be had and inquired into the matter with a precise application of the legal provisions. That way, the Court’s resources won’t be wasted and they can be diverted to a more deserving case.
Section
120(3) of the CPC clearly enumerates the duty of the OIC in the police station
to submit a report to the Magistrate and in that report, if there is no
allegation that:
1) The suspect has committed an offence OR
2) Been concerned in the committing of any
offence, the Magistrate shall discharge him.
Therefore, the learned Magistrate has a duty to examine the report forwarded by the complainant before making a determination, without merely endorsing the contents of the report of completed investigation. Section 120(3) of the CPC awards such judicial discretion in order to cater towards the protection of an individual’s rights to liberty and freedom, thus such discretion must be exercised judiciously. In doing so, the Magistrate must clearly record his reasoning, independent to the submissions by the parties. As highlighted above, the role of the Magistrate in the event Section 120(3) CPC is invoked is to exercise his discretion to assess whether the threshold requirement of sufficiency and reasonableness has been met to satisfy the existence of a prima facie case to proceed to the formal charging of the suspect.
Therefore, this Court holds that the impugned order has erred in several issues. Thus, this Court affirms that there exists an irregularity and an illegality in the impugned order. Hence, this Court sets aside the order of the learned Magistrate dated 22.12.2021 and discharge the petitioner and the suspect respondent. - The application is hereby allowed.
END OF THE JUDGMENT
-----------------------
READ JUDGMENT VISITING COURTOFAPPEAL.LK - CLICK
Comments
Post a Comment